The Undervalued Currencies Lurking in Europe

Now that the European Central Bank has tamped down disaster fears, a few currencies are poised to shine.

That long-term refinancing operation sure settled things down in Europe. From worries about a disorderly default in Greece, traders' attention quickly shifted to just how well the different European currencies will fare.

One thing is clear, say the strategists at Barclays Capital: the euro itself will not be the star. The single currency used to rally when risk appetite was improving, but "the actions of the ECB have broken the link between the EUR’s performance and global risk appetite," they say.

So where are the opportunities? Up north, apparently. The BarCap strategists have ranked the European currencies based on their correlation with oil prices, their carry compared to the euro and other factors. The Swedish krona , Polish zloty , and Norwegian krone top the list. On the flip side, the strategists say, are lower-yielding currencies like the euro or the Swiss franc .

To trade this approach, the BarCap strategists suggest selling the Swiss franc against the Norwegian krone, entering around 6.336 with a stop at 6.437 and a target of 5.880.